Economic sentiment in Germany strengthened noticeably in December 2025, signalling rising confidence after a prolonged period of stagnation. Expectations climbed sharply to 45.8 points, up 7.3 points from the previous month, reflecting optimism that expansive fiscal policy could stimulate a long-awaited recovery. This forward-looking improvement suggests that firms and investors increasingly see scope for growth after three years of subdued economic performance.

However, this optimism contrasts with continued weakness in current conditions. The assessment of Germany's present economic situation slipped further into negative territory, falling by 2.3 points to minus 81.0, underlining that the recovery has yet to translate into tangible improvements on the ground. Sectoral trends offer some encouragement. The automobile industry recorded a notable improvement, with its indicator rising by 7.7 points to minus 22.0, while chemicals, pharmaceuticals and metals also showed modest gains. Nevertheless, export-oriented industries remain constrained by high tariffs, weak external demand and structural competitiveness challenges.

A similar pattern is evident at the eurozone level. Expectations rose more strongly than in Germany, increasing by 8.7 points to 33.7, while assessments of the current situation remained broadly flat at minus 28.5. Overall, sentiment is improving, but the recovery remains fragile and uneven, taking the RPI to 24 and the RPI-P to 28. This means that economic activities continue to outpace the expectations of the German economy.

Only modest improvement expected with current conditions at minus 78.4 for December versus minus 78.7 in November. Sentiment expected at 39.3 versus 38.5 in November.

The Mannheim-based Centre for European Economic Research (ZEW), asks German financial experts every month for their opinions on current economic conditions and the economic outlook for Germany (as well as other major industrial economies). The responses are synthesised into two simple indices that provide a snapshot of how the economy is seen to be performing.

The ZEW Indicator of Economic Sentiment is calculated from the results of the ZEW Financial Market Survey. The ZEW is followed closely as a precursor and predictor of the Ifo Sentiment Survey and as such is followed closely by market participants. The data are available around mid-month for the current month. The survey provides a measure of analysts' view of current economic conditions as well as a gauge of expectations about the coming six months. The latter measure tends to have the larger market impact and reflects the difference between the share of analysts that are optimistic and the share of analysts that are pessimistic. About 350 financial experts take part in the survey.